Question

Assume there is a negative supply shock; for illustrative purposes let’s say that a wildfire burned several acres of farmland and wheat crops are annihilated. In a perfectly competitive market what would happen to the market equilibrium of wheat?

Question 23 options:

	price increases, quantity increases
	price increases, quantity decreases
	bruh, nothing really happens
	price decrease, quantity decreases
	price decreases, quantity increases

Which of the following would lead to a decrease in supply?

Question 22 options:

	Increase in the number of producers
	Increase in the price of physical capital
	Pancake volcano
	Decrease in real wages
	Tax cuts for consumers

Is the following a positive or normative statement? The Federal Reserve, the central bank of the United States, should set an inflation target and employ active policies to meet the target.

Question 3 options:

	Normative
	Positive

Is the following a positive or normative statement? The federal minimum wage is lower than many state minimum wages.

Question 4 options:

	Normative
	Positive

Is the following a positive or normative statement? When the minimum wage is raised, unemployment generally increases.

Question 5 options:

	Normative
	Positive

Is the following a positive or normative statement? The United States government ought to ensure the general welfare of its citizens.

Question 6 options:

	Normative
	Positive

Answer 1

Ans. Option b

A negative supply shock will lead to decrease in supply of wheat which at given demand for wheat will increase prices and decrease quantity of wheat at equilibrium.

Ans. Option b

Increase in the price of physical capital will increase the cost of production decreasing the profits of the firm leading to decrease in supply

Ans. Normative

As the suggestion of Fed making a target inflation and meeting the target is based on the value judgement of the advisor and is not based on the facts

Ans. Positive

Minimum wage is set lower by the federal government than many states is based on facts and not values

Ans Positive

This is because the statement must be based on some date that increasing the minimum wages increases unemployment.

Ans Normative

This statement is based on the value judgement that what the United States Government should do.

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